outsourcing Software software development

Nearshore Outsourcing Is Up During Covid-19. Here’s Why.

nearshore outsourcing software development

The Covid-19 pandemic has brought about two simultaneous but seemingly paradoxical trends: remote work and deglobalization. Leaders trust their team members to deliver from afar, but they’re not so confident these days in global supply chains. 

While manufacturing supply chains have faced particular disruptions, the software development sector has also come under scrutiny. The halt in global travel has hampered U.S. companies’ access to many overseas programming hubs.

With that said, no industry experts we are aware of foresee a slowdown in the offshoring of programming work. Large companies and startups alike will continue to tap into less expensive labor markets.

How can leaders square the trend toward global software development with its supply chain risks? Through a strategy known as nearshore outsourcing.

Nearshore Outsourcing in Software Development

In the context of software development, nearshore outsourcing is the exportation of programming work from mature markets to developing ones in relative geographic proximity. A Texas-based SaaS company is engaging in nearshore outsourcing when it hires programmers in Mexico, for instance.

Interest in nearshore outsourcing among the Fortune 500 has skyrocketed during the pandemic, according to global consulting firm MJV Technology & Innovation. “We have seen that the pandemic has accelerated deglobalization,� MJV CEO Mauricio Vianna says, “as manufacturing and development in farshore locations have been suspended. Companies are shifting to nearshoring to solve the problems of a hyper-globalized production chain.�

But what, exactly, separates nearshore from farshore outsourcing? And what does it take to outsource to nearby markets effectively?

Nearshore vs. Farshore

The distinction between “nearshore� and “farshore� isn’t always clear. One key variable is proximity: Executives are looking for locales that they could reach within a few hours’ plane ride.

American business leaders can’t hop on a plane to Siberia and arrive the same day. Companies like MJV have offices across South America, which is much more reachable from North American cities.

Another consideration is the time difference between office locations. “I believe the biggest of the benefits of nearshore over farshore outsourcing is the proximity of the teams,� Vianna explains. “By being on the same or in a very close timezone, farshoring problems like working hours, alignment meetings, and longer trips are avoided. Besides, companies don’t need to wait twelve hours to get an answer or talk with the development team.�

A third is cultural similarity. American software developers will have a much easier time relating to their Canadian counterparts than, say, those based in China. “Education, business practices and work-life customs are very similar in America and Canada,� notes Evelyn Ackah, founder of Ackah Law, a Canadian business immigration law firm. “Most American project managers, as well as end-users, would not recognize an American product that was developed in Canada.�

Common Nearshoring Mistakes

To be sure, there are risks associated with nearshore outsourcing. Whether a company is pivoting its software development from either a farshore location or an in-house team, these must be mitigated. 

Just as in a farshore outsourcing project, cost savings are top of mind for executives. But vetting a nearshore partner who can deliver the required results on the desired budget is where many companies fall short. “Your choice of partner should not be a decision based solely on cost,� warns Vianna.

Security is also critical. Any form of offshoring can expose companies to data security liabilities. Due diligence is necessary to ensure that potential partners are compliant with relevant data privacy and security regulations in both local and international markets.

Beware, too, of labor laws. Nearshoring company MobSquad was recently accused of misusing a temporary foreign worker program. When in doubt, ask for proof of compliance. 

Finding a Nearshore Outsourcing Team

Nearshore outsourcing offers all the benefits of outsourcing without many of the headaches of a foreshore location. Still, cultural fit and production capacity should not be overlooked.

Vianna recommends looking for outsourcing partners with multidisciplinary teams that are familiar with modern programming languages. And don’t forget to check for value alignment. Ethics matter, wherever a development team is based or whatever its contribution. 

Finding a nearshoring provider that ticks all the boxes is just as tough as locating one that specializes in farshore outsourcing. Scrutinizing another company’s culture, creative philosophy, and values is no small task. But with any partner, checking for fit on all three fronts must be a priority.

The post Nearshore Outsourcing Is Up During Covid-19. Here’s Why. appeared first on ReadWrite.

Analysis H1B visa international news outsourcing Tech Tech industry trends visa ban

Why the H-1B Visa Freeze Puts the Tech Sector in Jeopardy

H-1B visa freeze

On June 22, President Trump signed an executive order temporarily suspending visas like H-1Bs. The ban seeks to ensure that there are open positions for American workers, citing COVID-related job losses. Without H-1B visa holders, though, the U.S. tech industry could face some considerable new challenges.

An H-1B is a work visa for workers in specialty fields like IT, science, and medicine. As a non-immigrant visa, it goes to people who aren’t U.S. residents but want to stay in the country temporarily. Before the ban, the U.S. would give out a limited number of H-1Bs a year, but now, they won’t issue until 2021.

Supporters of the ban point towards the unemployment rate, which neared 15% in April. Supposedly, suspending work visas would help keep jobs open for Americans who lost their jobs. That’s a reasonable cause, but this visa freeze may do more harm than good for the tech industry.

America’s Tech Talent Deficit

The U.S. has dealt with a tech talent shortage long before the pandemic hit. In the past few years, the technology industry has boomed, but the number of qualified workers hasn’t kept up. There’s too much demand for American workers to fill all of the open tech positions.

Mehul Patel, CEO of tech recruiter Hired, explains how every company is a tech company in today’s world. Even if a business doesn’t design or build technology, it needs IT workers to function. Technology has become inseparable from all kinds of businesses, leading to a massive demand for tech workers.

As of late 2019, there were roughly 918,000 unfilled IT positions among American employers. Fewer than 70,000 people graduate with a computer science degree each year, leaving a considerable gap even if every graduate got an IT job. Even if workers took every available H-1B visa a year, it wouldn’t be enough to fill this skills gap.

Before the ban, the U.S. only issued 85,000 H-1Bs a year. This visa program helps tech companies account for the talent deficit, but not entirely. Even with the H-1B program in full force, there would still be tech jobs available for American workers.

The Tech Industry’s Reliance on H-1B Visa Holders

Given the skills gap, banning H-1Bs won’t impact on the number of available tech jobs much. Not only would it be ineffective in improving job availability, but it could go so far as to damage the industry. Since the tech sector has such a considerable talent shortage, it’s come to rely on the H-1B program.

More H-1B visas go to workers in the tech industry than any other sector. In 2017, Amazon alone hired 2,500 H-1B holders, and the other top H-1B hirers were all tech companies. Losing these workers means that the nation’s tech businesses would lose a substantial part of their workforce.

At current levels, the U.S. isn’t producing enough qualified tech workers to sustain the industry’s astronomical growth. Tech companies have embraced H-1B workers because it helps them make up for this gap. Since the pandemic has contributed even more to tech’s growth, businesses need these workers more than ever.

Losing a Competitive Edge

Filling the skills gap isn’t the only reason why tech has turned to the H-1B program. Being able to pool talent from other countries has enabled U.S. tech companies to acquire the business’s best minds. This visa program is a major reason why the U.S. has dominated the global tech market.

Hiring foreign workers helps U.S. companies get the best talent that the world has to offer. It also brings that talent away from other nations, further solidifying America’s competitive edge. Without these workers, the U.S. could lose its status as a world leader in technology.

The consumer tech sector accounts for almost 12% of the GDP, generating $2.3 trillion annually. If the industry loses one of its most profitable advantages, it could impact the U.S. economy as a whole. As the sector loses some of its best talent, it could become less profitable, contributing less to the economy.

If the U.S. loses its spot a the top tech nation, it could draw American employees out. Tech graduates could leave the country to work in other nations with a better technology market.

Nearshoring as a Response to the Ban

If tech companies can’t use H-1Bs, they may turn to other options that could hurt American jobs. One potentially lucrative option is nearshoring, which involves hiring staff in other counties in similar timezones. Nearshoring gives businesses the advantages of offshoring while being able to collaborate more easily.

Nearshoring would enable U.S. tech companies to retain international talent and keep their competitive edge. While it may sustain the tech industry, this movement could impact American jobs more than the H-1B program would. As more companies nearshore to make up for the H-1B freeze, they could prefer it over hiring locally.

There’s a limited number of available H-1Bs, but there’s no limit on how much nearshoring a company can do. The H-1B freeze could lead to a surge in nearshoring’s popularity, leading to fewer Americans’ available jobs. This strategy was always an option, but it may be a more enticing one without the H-1B program.

Opposition to the Visa Freeze

The tech sector is well aware of how the H-1B freeze could threaten it. In response, a group of tech giants filed an amicus brief against the ban in early August. The group, which includes companies like Amazon, Facebook, and Microsoft, argued that the ban would cause irreparable damage to the U.S. economy.

Technology companies aren’t the only organizations that announce opposition to the temporary ban either. In July, several business groups filed a lawsuit against Homeland Security and the State Department over the freeze. With plaintiffs like the Chamber of Commerce, this lawsuit has the potential to change something.

Google and Spotify also filed a request to support this lawsuit. The case goes beyond stating the ban’s potential economic impact, claiming that it exceeds the president’s authority. With all of this opposition, the H-1B freeze may not go into effect, but the lawsuit’s outcome remains uncertain.

What Will Happen to Tech When the Ban Lifts

If lawsuits don’t reverse it, the ban will last until the end of 2020, unless authorities think they need to extend it. Even if it does end in December, the tech industry may not revert to its previous state. Just a few months of restriction is enough to change an entire industry, especially one as fast-paced as technology.

The tech industry needs to move fast to meet ever-changing demands and to stay ahead of the competition. If the H-1B ban lasts long enough, tech companies will have to adjust, which could likely mean outsourcing or nearshoring. A few months of these practices could lead the industry as a whole to adopt them, too.

If tech businesses don’t resort to these strategies, the ban would still have lasting effects. A few months without access to the world’s top tech talent is more than enough for the industry to fall behind. By the time the ban lifts, potential H-1B applicants may want to stay in other countries with better tech industries.

As more tech talent emerges, the reinstated H-1B program could start to fuel the U.S. tech sector again. It would take a long time for it to get back to where it was before, though. The tech industry could reach its former glory again, but it won’t be immediate.

The Future of the U.S. Tech Industry Is Uncertain

At this point, all of these outcomes are just speculation. Whether or not the H-1B visa ban will last is up in the air, how U.S. tech companies will react. While none of these consequences are certain, most of them aren’t promising either.

The visa freeze has the potential to threaten the U.S. tech industry. The H-1B program is one of its greatest strengths, and without it, U.S. tech may not be able to keep its lead.

The post Why the H-1B Visa Freeze Puts the Tech Sector in Jeopardy appeared first on ReadWrite.